Surely many of us are familiar with the phrase BOT or BOT toll station. So what does this phrase actually mean, where does it come from? In the following article, LSX Lawfirm will help readers understand more about BOT.
Investment Law 2020
What is a BOT?
BOT is an acronym for the phrase Bulding- Operate- Transfer which means Build-Operate-Transfer. This is one of the types of contracts based on the form of public-private partnership (PPP). More specifically, BOT contracts was stipulated as follows: Build – Operate – Transfer; this is a contract between a competent state agency and an investor; or project enterprise for the construction of infrastructure works floor. After completing the work, the investor or the project enterprise is entitled to operate the work for a certain period of time; At the end of the time limit, the investor or the project enterprise shall transfer the work to a competent state agency.
In essence, BOT is a type of commercial contract, signed between one party is a competent state agency (usually ministries, ministerial-level agencies or People’s Committees at all levels) and the other party is a developer investors, domestic or foreign enterprises with financial potential and ability to implement projects.
The object of the BOT contract
The object of the BOT contract is the construction of infrastructure projects that are typical and most commonly seen in Vietnam, which are the construction projects of road traffic infrastructure and highways. Besides, hese are projects that require a large total investment capital of up to thousands or tens of thousands of billion VND. With such a large investment capital; the state budget is limited. Therefore, at this time; the BOT contract is considered as an effective solution while helping the state achieve the goal of infrastructure development for the purpose of economic development. Besides, it also helps investors and businesses gain profits from construction investment activities.
Contents of the BOT contract
Based on the objective, nature and type of the project contract, the parties shall agree on all or some of the following basic contents:
- Objectives, scale, location, duration and progress of project implementation; project construction time;
- Technical requirements, technology, quality of project works, products or services provided;
- Total investment capital and financial plan of the project;
- Value, conditions, rate and progress of implementation of the State’s participation in the PPP project (if any); principles of handling when the planning of the land fund to be paid to investors in BT projects is adjusted by a competent authority resulting in a change in the value of land use rights;
- Conditions for land use and related works;
- Compensation, site clearance and resettlement;
- Construction work; requirements on inspection, supervision and quality management during the construction process pre-acceptance test and settlement of completed project works;
- Inspection, operation, maintenance, business and exploitation of project works; transfer of works;
- Ensure safety and protect the environment;
- Conditions and procedures for receiving the lender’s project;
- Division of risks and responsibilities of the parties in the contract including competent state agencies, authorized agencies (in case of signing authorization) and investors; principles of handling when disputes arise; events of force majeure;
- Investment incentives and guarantees (if any);
- Law on Adjusting Project Contract Relations, Related Contracts and Dispute Resolution Mechanism;
- Validity and duration of the project contract;
- Principles and conditions for amending, supplementing and terminating project contracts; transfer of rights and obligations under the project contract;
- Other contents as agreed between the signatories.
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BOT is an acronym for the phrase Bulding- Operate- Transfer which means Build-Operate-Transfer. This is one of the types of contracts based on the form of public-private partnership (PPP). More specifically, BOT contracts was stipulated as follows: Build – Operate – Transfer, sign between a competent state agency and an investor.
The content of BOT contracts includes the specific rights and obligations of the parties during the implementation and operation of the project.
Each party to the contract will have different purposes so specifying the rights and obligations of the parties helps the project implementation take place in accordance with the purposes set out by the parties.